With reference to the effect of increasing returns to location and in particular of Arthur (1989), identify the tilting point in the following sequence of locations. Please identif... With reference to the effect of increasing returns to location and in particular of Arthur (1989), identify the tilting point in the following sequence of locations. Please identify the tilting locator. How much are the locational benefits for this firm?
Understand the Problem
The question is asking about the method of determining the tilting point for locations based on a specific study by Arthur (1989). It involves analyzing a sequence of locations to identify the 'tilting locator' and explain the locational benefits for a firm.
Answer
8th firm, R-type choosing B; locational benefits increase.
The tilting locator is the 8th firm, which is R-type, choosing location B. The locational benefits for the firm from this shift onward would increase as everyone begins locating in B.
Answer for screen readers
The tilting locator is the 8th firm, which is R-type, choosing location B. The locational benefits for the firm from this shift onward would increase as everyone begins locating in B.
More Information
Paul Krugman and W. Brian Arthur analyzed increasing returns and economic geography, showing that certain locations become more attractive as more firms locate there, benefiting all firms due to agglomeration effects.
Tips
Assuming an invariant preference for the natural location without accounting for economic shifts can lead to errors.
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